Divisive US Congress agrees on $300bn spending increase

The US Congress has reached a two-year budget deal to raise government spending by almost $300 billion.

US Senate majority leader Mitch McConnell, who along with Senate Minority Leader Chuck Schumer announced that they have reach agreement on a two-year budget deal. Photo: AFP / Alex Wong / Getty Images

Congressional leaders reached the deal in a rare display of bipartisanship on Wednesday, attempting to curb Washington's fiscal policy squabbling but also widening the federal deficit.

The agreement, announced by the Republican and Democratic leaders of the Senate and House of Representatives, would lift caps on defense funding and some domestic spending. It also would postpone a reckoning with the federal debt limit.

A congressional source familiar with the agreement said it would increase non-defense spending by $131bn and include $20bn for infrastructure spending. It also would extend funding for the Children's Health Insurance Program (CHIP) for 10 years instead of the current six, the source added.

Immigration again emerged as a possible point of contention. House Democratic leader Nancy Pelosi, who helped negotiate the accord, nevertheless said she would oppose it unless Republican House Speaker Speaker Paul Ryan promises to advance legislation to protect hundreds of thousands of young adult immigrants, known as "Dreamers," brought to the United States illegally as children.

January's shutdown came after Democrats sought to have a spending bill include protections for the Dreamers that President Donald Trump has rescinded effective in March.

Republicans are eager to keep spending and immigration separate. Mr Trump threatened on Tuesday to upend budget talks by saying he would welcome a government shutdown if Congress were not able to agree to changes in immigration law that he said would prevent criminals from entering the country.

The plan will need to be passed in the House and the Senate, both controlled by Mr Trump's fellow Republicans, before it can be sent to the White House for the president to sign into law.

House Democrats have warned they will not back the deal unless the Republican House Speaker promises to advance separate legislation on immigration policy.

Chuck Schumer, leader of the Senate Democrats, touted the deal, saying: "It should break the long cycle of spending crises that have snarled this Congress and hampered our middle class".

The defense spending increase in it should allow Mr Trump to make good on his campaign promise for a military build-up.

The White House said the deal included an extension, until March 2019, of the government's debt ceiling. The Treasury Department has been warning that without an extension in borrowing authority from Congress, the government would run out of borrowing options in the first half of next month, risking an unprecedented debt default.

$300bn deficit increase

White House legislative affairs director Marc Short said the deal would increase spending by "just shy" of $300bn.

A senior congressional aide said this amount of additional spending would not be offset by any spending cuts or new tax revenue, meaning an increase in the federal deficit.

Along with President Donald Trump's tax cuts that were approved by Congress in December, the new round of spending would further add to the bulging deficit and may face resistance in the House from Democrats as well as Republican fiscal hawks.

"This bill is the product of extensive negotiations among congressional leaders and the White House," Senate Majority Leader Mitch McConnell, a Republican, said on the Senate floor.

"This really is the moment where it has become clear that despite record levels of debt and approaching trillion dollar deficits, Congress has stopped caring about what they're doing to the fiscal health of the country," said Maya MacGuineas, head of the Committee for a Responsible Federal Budget, a group that advocates for long-term fixes to Washington's debt problems.

Aside from the budget deal, lawmakers were also trying to reach agreement by Thursday to avoid a government shutdown and fund the government until 23 March.

If that failed, the US government would suffer its second shutdown this year after a partisan standoff over immigration policy led to a three-day partial shutdown last month.